Before
the Court is PCMS's Partial Motion to Dismiss. PCMS
asserts that EZLinks's fraudulent-inducement claim
rehashes its breach-of-contract claim. PCMS argues that
Delaware law prohibits a party from recomposing a
quintessential contract claim as a fraud claim. Because
EZLinks's claims of fraudulent inducement and breach of
contract, though sufficiently distinct, have identical
damages allegations, the Court GRANTS PCMS's Partial
Motion to Dismiss.

II.
FACTUAL AND PROCEDURAL BACKGROUND

In late
2013, EZLinks, through a third party, solicited a Request for
Proposals ("RFP") from various companies for a new
Point-of-Sale ("POS") system.[1] In mid-January
2014, PCMS responded (the "PCMS Proposal"). EZLinks
thoroughly reviewed the PCMS Proposal, and the parties began
a working relationship.[2] The parties first made direct contact
on February 14, 2014.[3] And a phone conference followed on
February 18, 2014.[4] EZLinks contends PCMS representatives
stated then that "their point-of-sale solution could
handle 'remote printing.'"[5]

PCMS
provided EZlinks with sales demonstrations of PCMS's
proposed POS system on March 6 and 13, 2014.[6] On March 18,
2014, several of EZLinks's directors had a technical
meeting with PCMS to discuss the POS's
specifics.[7] The parties had further meetings on April
22, April 30, and May 28, 2014.[8]

The
parties' CEOs met on August 1, 2014. There, PCMS's
CEO made the following statements: (1) PCMS could complete
the project for the POS system to meet EZLinks's current
customer demands within seven months, with "Phase
0" completed by November 2014, "Phase 1"
completed by January 5, 2015, and "Phase 2"
completed by March 2015; and (2) PCMS could complete the
project for the POS System to meet EZLinks's current
customer demands on a budget of $1.4 million.[9]

EZLinks
now contends that PCMS made these statements to fraudulently
induce EZLinks into signing a Reseller
Agreement.[10]

Based,
in part, on the PCMS Proposal, and the parties'
conversations on February 18, 2014, and August 1, 2014,
EZLinks awarded its new POS contract to PCMS. The parties
signed a Reseller Agreement on October 9, 2014 (amended July
30, 2015).[11] That Reseller Agreement contemplated
that the parties would enter into various "statements of
work" ("SOWs") providing EZLinks updates on
PCMS's performance.[12]

PCMS
allegedly fell behind schedule and ran over budget. In early
2015, EZLinks expressed its frustration with the
project's timing and overruns.[13] In February 2015, PCMS
provided a scaled-back beta POS system. It didn't
work.[14]In September 2015, PCMS delivered a
second beta POS system. It also was allegedly
defective.[15] Then PCMS billed EZLinks $1.8 million
for its work; exceeding the earlier $1.4 million
projection.[16]

The
parties entered into separate SOWs, numbered 2-8, to track
PCMS's continued work.[17] SOWs 2-7 set deadlines for
work associated with each. And under the SOWs' terms,
PCMS had to notify EZLinks by February 29, 2016, if it would
not or could not meet those respective
deadlines.[18] PCMS neither met the deadlines nor
timely notified EZLinks that it would fail to meet
them.[19]

On May
19, 2016, EZLinks, fed up with the delays, terminated the
Reseller Agreement. EZLinks rejected PCMS's outstanding
invoices, demanded a return of the nearly $1.6 million it had
already paid out, and triggered the parties' pre-suit
dispute resolution measures.[20] Dispute resolution failed.

EZLinks
filed this suit on July 12, 2016. EZLinks's complaint has
two counts: Breach of Contract and Fraudulent Inducement.
EZLinks describes the parties' relationship in two
phases: pre- and post-Reseller Agreement. EZLinks contends
the PCMS Proposal, and PCMS's February 18 and August 1,
2014 assurances constituted false statements and
misrepresentations.[21] It says these pre-contractual statements
fraudulently induced EZLinks into signing the Reseller
Agreement. EZLinks claims further that, post-signing, PCMS
breached the Reseller Agreement by not following the SOWs.

At oral
argument, the Court requested supplemental briefing on three
things: (1) whether rescission or rescissory damages were
requested or applicable; (2) whether anything in the Reseller
Agreement prohibited or limited available damages; and (3)
whether EZLinks could "identify the specific damages
requested under each claim and how they differ in the
complaint as it is drafted now."[22]

III.
PARTIES' CONTENTIONS

PCMS
contends EZLinks's fraud claim fails for two
reasons.[23] First, PCMS argues that the
pre-contractual statements' alleged falsities are
premised solely on PCMS's later alleged failures to
perform under the agreement - it is merely a reclad
breach-of-contract claim. As such, EZLinks fails to allege
fraud damages other than those based on expectations in the
agreement. And so the claims are
indistinguishable.[24]

Second,
PCMS argues that EZLinks did not adequately plead fraudulent
inducement, namely justifiable reliance and false
representations of material fact. Even if EZLinks's
allegations are given full credit, PCMS says the allegations
do not meet the pleading standard required for fraudulent
inducement.

EZLinks
counters that its fraudulent inducement claim is distinct.
According to EZLinks, as a part of the negotiation process
PCMS agreed to customize the POS system by adding functions
to standard capabilities PCMS claimed were already in
existence. EZLinks argues that PCMS "grossly
misrepresented [the POS system's] capabilities" and
that few of the "standard" functions were in fact
standard.[25] EZLinks claims PCMS knew it would have
to build these functions into the system, but did not tell
EZLinks. It also argues that PCMS misrepresented the budget
and time necessary to develop the software and that PCMS knew
this when the misrepresentation was made.[26]

EZLinks
argues PCMS's statements "defrauded [it] to get [it]
to sign the deal, making this a classic fraudulent inducement
case."[27] EZLinks says that the obligations
arising under the Reseller Agreement are based on the
assumption that the software functioned as represented by
PCMS. Yet, EZLinks posits, PCMS knew: that the software did
not have the required capabilities the time of the Reseller
Agreement; that the required capabilities could not be
developed on the timeline given before the Reseller Agreement
was entered into; that PCMS made the representations to
induce EZLinks to enter into the Reseller Agreement; and that
PCMS wrongly profited from that agreement.[28] Its two
claims are distinct, EZLinks says. And, therefore, it may
seek damages via both.

IV.
STANDARD OF REVIEW

When
considering a motion to dismiss pursuant to Superior Court
Civil Rule 12(b)(6), the Court will:

(1) accept all well pleaded factual allegations as true, (2)
accept even vague allegations as "well pleaded" if
they give the opposing party notice of the claim, (3) draw
all reasonable inferences in favor of the non-moving party,
and (4) [not dismiss the claims] unless the plaintiff would
not be entitled to recover under any reasonably conceivable
set of circumstances.[29]

But the
Court will "ignore conclusory allegations that lack
specific supporting factual allegations."[30]

The
Court must accept as true all well-pleaded allegations for
Rule 12(b)(6) purposes.[31] And every reasonable factual
inference will be drawn in the non-moving party's
favor.[32] If the claimant may recover under that
standard of review, then the Court must deny the motion to
dismiss.[33] This is because "[d]ismissal is
warranted [only] where the plaintiff has failed to plead
facts supporting an element of the claim, or that under no
reasonable interpretation of the facts alleged could the
complaint state a claim for which relief might be
granted."[34]

(1) the time, place, and contents of the false
representation; (2) the identity of the person making the
representation; and (3) what the person intended to gain by
making the representations. Essentially, the plaintiff is
required to allege the circumstances of the fraud with detail
sufficient to apprise the defendant of the basis for the
claim.[36]

V.
DISCUSSION

For
both a breach-of-contract claim and a tort claim to coexist
in a single action, "the plaintiff must allege that the
defendant breached a duty that is independent of the duties
imposed by the contract."[37] PCMS argues that the issue
here is whether the allegedly false statements were
independent of the Reseller Agreement's terms. Generally,
a fraud claim only survives if it is based on some conduct
distinct from that constituting a breach of
contract.[38] PCMS contends that all three of
EZLinks's assertions are "inextricably linked to
contractual duties and obligations."[39] And, PCMS
posits, all three theories of the alleged falsity are
"based entirely on EZLinks' expectations regarding -
and PCMS' performance under - the Reseller Agreement and
Statements of Work."[40] So, because the fraudulent
inducement claim is based solely on PCMS's alleged
failure to deliver the POS system as EZLinks expected them
to, the Court should dismiss the claim.[41]

Not so
says EZLinks. It complains it was fraudulently induced to
enter into the Reseller Agreement with PCMS by: (1)
statements in PCMS's RFP Response;[42] (2)
PCMS's alleged statement on February 18, 2014 about
remote printing;[43] and (3) PCMS's alleged statement on
August 1, 2014 about the project's timing and cost of the
project.[44]

A.
PCMS's Statements in the RFP Responses

PCMS
first contends that Complaint Paragraphs 11-13 merely allege
that the software actually delivered under the contract did
not meet EZLinks's expectations, not fraudulent
inducement to enter the contract. To maintain its contention,
PCMS cites to various paragraphs of the
Complaint.[45] PCMS alleges that all of the allegations
in Complaint Paragraphs 12 and 13 simply criticize the
product actually delivered; they say nothing of what was
stated in the RFP Response.[46]

PCMS
correctly notes that "Delaware courts will not permit a
plaintiff to 'bootstrap' a breach of contract claim
into a tort claim merely by intoning primafacie elements of the tort while telling the story
of the defendant's failure to perform under the
contract."[47] As Paragraphs 12 and 13 describe only
the ways the delivered software failed to meet EZLinks's
expectations, they merely "tell[] the story of the
defendant's failure to perform under the
contract."[48] Those specific issues EZLinks has with
the product are, of course, "better addressed by
applicable contract law."[49]

B.
PCMS's February 18, 2014 Assurances

EZLinks
alleges that during a phone call on February 18, 2014, PCMS
"stated that their point-of-sale solution could handle
'remote printing' . . . which they knew to be
false."[50] PCMS argues that EZLinks was told that
"any written or oral communication" was not "a
contractually binding promise or
representation."[51] Again, PCMS states, EZLinks's
issue with the lack of a remote printing feature was due to
the delivered software failing to function as EZLinks
believed it would, not fraudulent inducement of the
contract.[52]

Our website includes the first part of the main text of the court's opinion.
To read the entire case, you must purchase the decision for download. With purchase,
you also receive any available docket numbers, case citations or footnotes, dissents
and concurrences that accompany the decision.
Docket numbers and/or citations allow you to research a case further or to use a case in a
legal proceeding. Footnotes (if any) include details of the court's decision. If the document contains a simple affirmation or denial without discussion,
there may not be additional text.

Buy This Entire Record For
$7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.